Misrepresentation, Non-Disclosure and Breach ... - Law Commission

6.73 In business contracts, we propose that the default rule should be the same as for
consumer life insurance: representations made by the person whose life is
insured should be treated as if they were representations by the policyholder.
However, the parties would be free to come to different arrangements about how
a representation by the life insured was to be dealt with.
6.74 As we explain in Part 5, our provisional proposals afford the parties considerable
freedom to come to their own arrangements. For example, if the answers were
set out specifically in the policy or in a schedule to the policy, they could be
accorded warranty status. However, this could not be done by a basis of the
contract clause, which simply said that the answers on another form formed the
“basis of the contract” or were warranties. The insurer would need to set the
answers out specifically in the contract or in a schedule to the contract so that the
policyholder had a chance to examine them. Where the parties contracted on the
insurer’s standard terms, our provisional proposals would also prevent a warranty
from being written in such a way as to defeat the insured’s reasonable
expectation of cover. This would, for example, control an insurer who sought to
rely on a clause in the small print stating that the policy may be avoided for a
misrepresentation by the life insured that had no bearing on the risk.
6.75 We provisionally propose that in business life-of-another policies, the
default rule should be the same as for consumer insurance:
representations by the life to be insured should be treated as if they were
representations by the policyholder. However, this would be subject to the
terms of the contract.
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